Can someone comment on the following hypothetical scenarios?
Searcher takes out an SBA loan and signs a PG. There are 4 other investors who own 15% each, none of them sign a PG.
Scenario 1: Six months after close, the searcher raises additional equity from one of the existing investors to grow the company more quickly. This increases the investor’s ownership stake to 30%. Would the investor be required to sign a PG in this scenario? How would the SBA even know?
Scenario 2: One of the investors also provides convertible debt in addition to buying a 15% equity stake. The debt can be converted to an additional 20% on a fully diluted basis, but only after the SBA loan is repaid. Will the investor be able to avoid a PG?
SBA personal guarantee rules for investors
by an investor from University of California, Berkeley - Haas School of Business
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